April 14, 2020 (MLN): The coronavirus pandemic has led to a sharp increase in negative rating actions – which include rating downgrades and negative outlook and watch changes – across the Asia-Pacific (APAC) corporates portfolio in the last four weeks, says Fitch Ratings.
Between 10 March and 14 April, in COVID-19-related actions, Fitch downgraded 16 issuers and revised the rating outlook to negative, or placed on watch negative the ratings of another 16 issuers. Its outlooks on three Vietnamese and two Thai state-linked issuers were revised to stable from positive following similar action on Vietnam (BB/Stable) and Thailand (BBB+/Stable), plus ENN Ecological Holdings Co., Ltd.'s rating watch status changed to Rating Watch Evolving from Rating Watch Positive on its 'BB' Issuer Default Rating (IDR).
Most of the negative rating actions occurred in the homebuilding, property, gaming, natural resources (including oil & gas), auto & related and technology sectors. Nearly 70% of the rating actions related to speculative-grade issuers, with 30% involving investment-grade issuers.
The extent of the rating actions in the APAC oil & gas sector has been limited compared with the US, given that the majority are state-linked ratings in Asia. However, Fitch has lowered the standalone credit profiles (SCPs) of some state-linked issuers, including Oil India Limited (BBB-/Stable) and PT Perusahaan Gas Negara Tbk (BBB-/Stable).
In addition, the credit rating agency has recognized lower headroom for growth CAPEX in the case of Australia's Woodside Petroleum Ltd (BBB+/Stable) and weakened headroom for the SCPs of the three Chinese National Oil Companies China National Petroleum Corporation (A+/Stable), China Petroleum & Chemical Corporation (Sinopec, A+/Stable) and CNOOC Limited (A+/Stable).
There was one 'fallen angel' during this period, with the Chinese retail mall owner Red Star Macalline Group Corporation Ltd. downgraded to speculative-grade (BB+/Stable) from investment-grade (BBB-/Stable). The Outlook on Singapore-based CDL Hospitality Real Estate Investment Trust has been revised to Negative from Stable, at 'BBB-'.
There were several multi-notch downgrades as well. These include the Australian airline operator Virgin Australia Holdings Limited whose IDR was downgraded by two notches to 'B-' (Rating Watch Negative) from 'B+'(Stable); Indonesia's Geo Energy Resources Limited was downgraded by four notches to 'CC' from 'B-'/Negative; and India's Future Retail Limited was downgraded by four notches to 'B-'(EXP)/Rating Watch Negative from 'BB'(EXP)/Positive.